First time home buyers often use an FHA home loans for their home purchase. FHA home loan updates beginning the 15th of September 2015 include many critical updates. Below are the key details on those updates.
Investment and Mixed-use Buildings
Updates apply to rental and mixed-use real estate. For rental real estate, only 75% of rental income can be counted as qualifying income. Estimates are based on either signed leases or on appraisal estimates of reasonable rents. At least 51% of a property must be for residential use to qualify for an FHA home loan.
Debt Ratios
Certain debts are being viewed a bit differently. For loans with 10 months or fewer left, your remaining monthly payments must be lower than 5% of gross monthly wages to be excluded as debt. For deferred loans, the entire loan amount is interpreted as the monthly payment. Charge accounts are only excluded from debt if you have a one year history of complete and on-time payments. If there were late payments, then 5% of the balance will be counted towards monthly debt analysis. Lastly, accounts where you are merely an authorized user are disregarded if timely payments were made during the last 12 months.
Employment History Changes
Multiple employment moves or gaps in employment status are reviewed. If you have changed employers more than 3 times during the last year, then you must provide confirmation that the changes were for training reasons or that you obtained higher wages and benefits with each change. If you were unemployed for 6+ months, you must confirm that you have had consistent employment over the past 6 months and some history during the past 2-years (not counting training).
Changes to Income Criteria
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Part-time Work
Applicants who work part-time must document a 2-year history. The average is used for qualification purposes. For applicants with recently improved wages, an average from the past year can be used. -
Overtime or Bonus Home Loan
If you are able to provide a 2-year history of overtime or bonus wages, then that additional amount may considered as additional wages. -
Reductions in Self Employment Home Loan
If you are self-employed and your earnings lowered by twenty percent or more, self-employment earnings will not be used as qualifying income. Exceptions are allowed for extenuating circumstances if you can document consistent or elevated earnings for the past 12 months. -
Other Sources of Income
Non-taxable income such as disability or social security will be qualified but only up to 15%.
Additional Changes
- Money Gifted - Gifted funds for a home purchase must come from a family member, excluding cousins, nieces, nephews, and close friends. Transfer of funds must be shown in bank statements.
- Two FHA Home Loans - Multiple FHA home loans are now allowed if you are relocating more than 100 miles due to employment reasons.
- FHA Streamline Refinancing - A streamline refinance is allowed in cases where the monthly payment (principal, interest, and PMI) increases less than fifty dollars monthly.
Additional Information On FHA Home Loan Updates Beginning The 15th Of September 2015
The FHA home loan updates beginning the 15th of September 2015 listed above impact FHA case numbers created home loan or later. If you already have a home loan in process, then these updates should not impact you. If you are not yet qualified, then you may want to do so before this deadline. Waiting could reduce your approved home loan amount or make it difficult for you get approved for a home loan.
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